How not to create jobs

There has to be something wrong when you have one-tenth of your population already working overseas, and yet the unemployment rate is still highest in the neighborhood.

Over the 15-year period 2000-2014, our unemployment rate averaged around 8.3 percent, while Cambodia only had 0.7, Thailand 1.7, Vietnam 2.6, Singapore 3.1, Malaysia 3.3, Laos 3.7, and Myanmar (Burma) 4.0 percent. Only Indonesia and Brunei, with 8.1 and 7.8 percent unemployment rates, respectively, had joblessness comparable to ours, but both are oil-rich states where citizens are heavily subsidized (especially in the latter). Regardless of possible differences in the definition and measurement of unemployment across these countries, the numbers still suggest that there’s something peculiar about the Philippine situation. For some reason, joblessness has persistently been a bigger problem for us than it has been in most of our Asean neighbors—even as our economy has lately been growing faster than most of theirs.

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Why is this so, when millions of Filipinos are already working overseas? What more if those overseas jobs weren’t there? It can’t simply be our larger population and its faster growth, as we’re talking of percentages here. Even in proportion to our larger population, the incidence of joblessness is still much higher. What have we been doing wrong all this time? What is unique about us that keeps us from creating enough jobs for our working-age population? All of us probably have our own pet theories on this. Let’s examine the problem more closely.

When there are not enough jobs for our workers, it could only mean one thing: There are not enough enterprises to employ them. What we need, then, are more businesses, whether large or small, ranging from informal microenterprises to giant multinationals, engaging in more productive activities that will require more workers to run them. Hence, we need to have an enabling environment that will make it both attractive and easy for new businesses to be established, and for existing firms to expand their operations. In other words, we need more investments in our economy by Filipinos and foreigners alike, setting up or expanding enterprises of all sizes all around us.

Luckily, overall investments in the country have been on a welcome uptrend since 2010, and have grown annually at double-digit rates after having stagnated for most of the preceding decade. The major part of these investments has been in manufacturing activities, which tend to create better quality jobs than those generated in agriculture and in all-too-common low-value services such as informal retail, or jeepney, tricycle and pedicab transport. A major factor was the elimination of import tariffs among the Asean economies starting in 2010, which induced substantial new investments in firms taking part in regional production networks spurred by free trade across the region’s 10 economies. This was evidenced by accelerated new investments in many of the country’s special economic zones, some of which are known to have been declining prospective locators for lack of space.

Even then, such investments have clearly not been enough to address our peculiar unemployment problem. Latest data show that we still have 2.3 million workers who are jobless, and another seven million who are underemployed, or in need of more and better work. It is these workers and their families who have yet to feel the positive effects of the economy’s recent growth performance, and who would benefit if there could be more enterprises put up all over the country. But as I’ve indicated in recent writings, government itself could be the most formidable stumbling block to creating more job-creating enterprises where they are most needed.

The signs of this are all too familiar. In most localities around the country, a prospective new business owner would have to go through hoops and ladders before the enterprise can begin to operate. The sheer number of permits and clearances one has to obtain to register an enterprise or build a structure seems to betray sadistic tendencies on the part of local officials. Many of them invent rules of their own, some at odds with national policies, and some clearly meant to create income opportunities for themselves. I’ve written about the local fire marshal who requires fire extinguishers to be obtained only from a sole accredited local supplier, for example. And when the prospective investor happens to be large, many a mayor would attempt to shake down the company for a piece of the action—when they should instead be laying out the red carpet for one who could potentially bring new jobs or livelihoods for their local citizens.

To be fair, there are a growing number of enlightened local executives who have seen the light, and have taken deliberate efforts to make business registration processes easy. But such enlightenment has yet to reach the majority of our mayors and governors, many of whom are seemingly bent on building a local business empire of their own, by hook or by crook. One can count places across the country where political kingpins would own dominant businesses in their local domains after three terms in office (even more so in the case of dynasties). Little wonder, then, that there has been growing clamor for the establishment of local economic zones run like our successful export processing zones—the main motivation being to get business out of the clutches of local politicians.

It seems to me that if we are to bring unemployment down to levels comparable with most of our neighbors, we need to start by fixing our politics from the ground up.

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